More than one in four savers (26%) with a workplace pension do not believe they will save enough for retirement, a survey by the Pensions and Lifetime Association has revealed.
With the UK facing a number of headwinds including the rising cost of living, war in Ukraine and the fallout from the Covid-19 pandemic, savers have long term concerns about their financial wealth when they stop working.
According to the PLSA, which is calling upon the government to raise auto enrolment contributions to help people save for retirement, those aged between 35 and 54 (29%) were most concerned that they wouldn’t have enough to live on, compared to just 20% of over 55s. Women expressed greater concern (31%) than men (21%).
More than a third (35%) of those on low incomes, with a total household income of up to £14,000, were concerned about the future, compared to just one in five (20%) of those with a household income of over £48,000.
The PLSA said a fifth (21%) of people who have a pension save into it to ensure they can reach a “minimum standard” of living according to the PLSA’s Retirement Living Standards. Around two in five (41%) want to ensure they have a moderate standard, while a third (33%) are seeking a comfortable living standard to allow them to do most of the things they would like to do in retirement. However, one in eight (12%) said they didn’t know what standard they would achieve.
According to the PLSA, a single person will need about £11,000 a year to achieve a minimum living standard, £21,000 for moderate and £34,000 a year for comfortable.
To help people achieve their desired retirement, the PLSA is urging the government to increase the level of automatic enrolment from 8% to 12% of all salary by early 2030s.
Under its proposals, PLSA believes pension contributions should be “levelled up”, meaning a 10% contribution split between employers and employees, by 2030 with employers asked to pay 2% more than now and employees not asked to make any additional contributions. Then, in the early 2030s, employers and employees would be each asked to pay an extra 1%, bringing the total contribution up to 12%.
Nigel Peaple, director of policy and advocacy at PLSA, said: “We have long argued that current contribution levels are not likely to give people the level of retirement income they expect or need. As the Government seeks to “level” up the economy, narrowing wealth disparities between regions and different demographics, we think now is the right time for the government to commit to levelling up pensions gradually over the next decade in affordable steps.”
Jessica List, pensions technical manager at Curtis Banks, added:“The silver lining here is that a quarter of savers are at least aware that they may need to save more to meet their retirement goals, and are probably more likely to do so when their circumstances allow.
“What may be more concerning is how many people in the remaining three-quarters incorrectly believe that their current level of savings will support them in retirement, and who may not voluntarily save more as they don’t realise the need to do so.
“Increasing the minimum level of auto-enrolment contributions, as suggested by the PLSA, could help to make sure more people are on track for a better retirement.”